Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.

 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate


On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.


RSS 2.0

Bringing the financial system into the 21st century

By Ken McKay - posted Tuesday, 10 February 2009

As a consequence of comments to my last article seeking my views on how a new Bretton Woods agreement would operate this article seeks to provide a framework for further discussion.

However before I do that I want to dispatch the fallacies coming from the Austrian School of Economics to the boundary (to use a cricket metaphor).

You would think that from their propaganda there were no recessions or depressions before the concept of Keynesian economics appeared, this is simply not correct. Recessions/depressions occurred in 1797, 1807, 1819, 1837, 1857, 1873, 1893 for instance all prior to the advent of Keynesian economics.


Keynesian economics sought to provide a system of stabilisation to reduce the consequences of the boom/bust cycle. It recognises that it is possible for price equilibrium between supply and demand to occur without ensuring all labour was being utilised.

Keynesian theory simply is that a new price equilibrium between supply and demand for goods could be created by altering levels of government expenditure, thus creating a price equilibrium that utilised all available labour.

The trick for governments is that creating debt to increase demand is only half the story. The activity that the government invests in has to increase economic capacity. Activities such as new dams, new roads, rail networks, ports etc that have the capacity to generate new economic activity or increase long term productivity, have traditionally been the activities undertaken during periods of Keynesian policy implementation. Employing persons to dig holes and fill in holes have not been a central part of Keynesian policies, but like all good propagandists the advocates of the Austrian School never let the truth get in the way of their story.

If we look at the recent financial crisis, its real root cause is that the private financial institutions have created a “blackmarket” fiat monetary system via the creation of derivatives notionally linked to the residential property market in the United States.

Looking at the damage done by the merchant bankers in this unregulated market it is unbelievable that the sales reps for the Austrian School believe that governments should abandon the regulation and control of the monetary system and hand it over to these same cowboys.

Framework for a new Bretton Woods Agreement

Rather than have one currency as the world’s reserve currency I propose the creation of an international four pillars framework. (Not to be confused with the four pillars underpinning the Australian Banking system.)


The four pillars would comprise of the United States dollar, the euro, the Japanese yen and the Chinese renminbi.

Each of these currencies would be fixed against a tri-metallic standard of gold, silver and platinum.

That is they would be fixed to a certain quantity of gold and for monetary conversion purposes silver and platinum would be fixed in value against gold.

  1. Pages:
  2. Page 1
  3. 2
  4. 3
  5. All

Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

16 posts so far.

Share this:
reddit this reddit thisbookmark with Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Ken McKay is a former Queensland Ministerial Policy Adviser now working in the Queensland Union movement. The views expressed in this article are his views and do not represent the views of past or current employers.

Other articles by this Author

All articles by Ken McKay

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Photo of Ken McKay
Article Tools
Comment 16 comments
Print Printable version
Subscribe Subscribe
Email Email a friend

About Us Search Discuss Feedback Legals Privacy